A peek at mall development in more mature markets..

Nimish V. Dwivedi

The “mallification” (a coined term) of India’s urban and semi-urban areas has begun in earnest. Shopping malls are sprouting up across the board and the unrealised potential of malls is being discussed in a variety of forums.

Every suburb in the major towns boasts of one or two major malls, if not more, and for those suburbs that that do not have one as yet, there are malls under development.

Malls have become the new landmarks. People offer directions with reference to the location of a certain mall. Real estate agents and companies charge a premium for buildings located near malls. Malls are also the new hangout for the “hip set”. They are on the way to becoming an accepted element of today’s urban lifestyle.

Many factors have lead to the boom in mall development. The fundamental driver is, of course, India’s economic growth, which has resulted in increased incomes and higher standards of living, particularly in the urban areas. The huge untapped opportunity in organised retail is another factor.

The easy availability of credit, driven by the huge number of credit cards in circulation, combined with on-the-spot instalment programmes, is another factor. The lack of destinations for families to shop, have a meal and amuse themselves are also driving the development of malls, where families can spend an entire day out shopping, watching a movie and grabbing a bite. There has also been a change in the consumer mindset, particularly amongst the younger generation, that is keen to experience what life has to offer and is willing to spend.

Mall development is at a nascent stage in India — where the key priority is simply to achieve penetration. Footfalls are easy to get because of the novelty of the concept.

But challenges have started emerging. The completion of some malls is getting delayed as developers are unable to attract the planned investments due to the recession. Brands facing cost pressures are either withdrawing altogether from malls or renegotiating rentals, affecting mall profitability. As customers cut back, malls are attracting “free footfalls” that do not translate into sales.

An evolving concept

Given the current scenario, the challenges for malls will only increase once the category evolves to a stage of early maturity. How will malls sustain themselves once the novelty wears out and competition becomes more intense? How do malls ensure loyalty during a recession?

I detail below some of the concepts that I have observed and experienced in a mature market like Hong Kong that have led to the ongoing growth of these malls even during the current recession.

The first concept is to match the range of outlets, brands, food choices, parlours, health clubs and other facilities available in the mall with the micro-market within which the mall operates. A micro-market is the surrounding area within which the mall attracts a large section of its clientele.

Malls that operate in low-income areas have a larger range of “value” brands and a small set of “premium” brands. Malls located in higher income areas have a wider range of luxury brands and designer outlets and very few “value” brands.

Malls that are located in office-dominated areas with a few residences ensure that they provide sufficient variety for after-work and lunch-hour shoppers/ eaters, in addition to creating events and promotions to draw in the residential crowds during the weekends.

Malls that are located next to five-star hotels exude similar levels of luxury as that enjoyed by the tourists and business travellers staying in the five-star hotels. This ensures that the mall becomes the primary shopping destination for guests staying at the hotels. For example, the IFC Mall and the Pacific Place Malls located adjacent to properties such as the Four Seasons, the Conrad and the JW Marriott.

The approach of focusing on certain market segments has also resulted in malls carving out an identity of their own over the years and standing for some unique attributes. There are malls that stand for a range of beauty products and salon services. Malls such as the IFC Mall provide exclusive beauty products combined with well-trained beauty advisors. They also have top-line salons and innovative spa options in the malls.

There are malls that have developed “kid friendly” attributes. These malls are stroller friendly and have a number of play areas for kids. They also have a range of toy and apparel stores for babies and kids. Even the restaurants in these malls have special “kids meals” besides baby seats and other such accessories. Malls such as Megabox, Times Square and Westwood Plaza are known for being kid-friendly with play areas, skating rinks and baby-changing facilities everywhere.

Some upscale malls have built on the “uniqueness” attribute. While brands may be available across different malls, these malls have a reputation for selling distinctive collections from a particular a brand. As an example, Puma may have brand stores across many malls but the unique malls feature its exclusive Black Collection only.

The Landmark Mall in Central has designer collections from Dries Van Noten to Furla to Ermenegildo Zegna that are the latest and exclusive. The Elements Mall has brands such as Bals Tokyo and Mulberry which are available only at this mall.

A supermarket chain such as City Super stocks “organic” and “international” merchandise such as Japanese products, fruits and groceries imported from all over the world and a range of organic products.

“Home-focused” is another attribute that malls have built as a standout feature. Such malls feature a range of home furnishing brands from different parts of the world, some of which have a single store only in that mall. These malls are able to attract home owners, home-makers and the entire set of “home proud” families.

“Electronic malls” feature the latest gizmos and gadgets from computers to games to peripherals. The Golden Computer Arcade is an example of an electronics-focused mall.

Malls have also built on the “discount brands” attribute. Located on the outskirts, these malls provide high-end or premium brands at discounts. Naturally, these are from an older collection and with limited choice, but the discount factor makes people travel long distances. The Citygate outlet mall in Tung Chung is famous for its discounted brands. Building a core attribute that becomes an “owned” property of the mall over a period of time, helps in significantly strengthening the “mall brand”, in ensuring ongoing patronage from its core target audiences and in drawing audiences from different parts of the city.

Layouts that make sense

Mall layouts that help to maximise both footfalls and conversions are another key factor in ensuring the ongoing sustainability, profitability and success of malls. As an example, cinemas, which attract the highest footfalls in malls, are typically located on the ground floor for ease of access.

Mass market brand stores are also located next to the cinema halls to grab the attention of the cinema-going crowds and to drive conversions. The upscale brands and eateries are located at higher levels, to draw select crowds seeking exclusivity and with greater spending power. Based on their unique attributes, different malls adopt different layout formats to provide the right experience and to achieve a higher percentage of conversions.

Loyalty programmes are another driver of mall sustainability in the mature markets. The Elements Mall loyalty programme offers points, parking benefits and a concierge service. Birthday benefits and pre-sale invitations are also available to the loyalty programme members.

Like everything else in India, it will be interesting to see how the mall category evolves. Also, it will be exciting to watch how these international concepts used by malls to create a competitive edge and drive profitable growth, are adapted in the Indian context to ride through economic cycles.

(The writer has worked in Japan and currently works at an international bank in Hong Kong. The views expressed are his own.)

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(This article was published in the Business Line print edition dated November 12, 2009)
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